These economic 'black swans' could rock global markets

Societe Generale is out with its latest quarterly chart of
so-called swan risks that threaten to rock the global financial
markets. For the most part, the risks remain unchanged from
November.

SocGen analysts reiterated that the two highest-probability risks
were a British exit from the eurozone, or Brexit, (45%) and an
economic hard landing in China (30%). And with the Brexit
specifically, there's the potential economic ripple effect into
the rest of Europe, which is already more politically divided
than it has been in ages.

The one change from the firm's most recent black swan chart is
that the risk of a new global recession has increased to 20% from
10% in late 2015.

Notably, the size of the swan indicates how big of an impact a
given risk would have should it come to be. So although out of
the listed risks, SocGen thinks that a Brexit is the most likely
to happen, it would not be the most impactful.

"Common to all these risks is the financial conditions component
that has the potential to act as an amplifier, both in terms of
the individual risks and in linking them together, making each
more likely," the SocGen team wrote.

It's worth noting that, technically speaking, black-swan risks
are by definition extremely unlikely and nearly impossible to
predict. So it's a bit of a contradiction to assign such high
probabilities to any of these events. Nevertheless, when these
events do materialize, it's bad. SocGen's swan chart is just
trying to show that major economic and geopolitical risks are
brewing that could cause serious problems should they ever come
into fruition.

On the positive end, SocGen also points to three upside risks:
stronger investment and trade; more fiscal accommodation; and the
possibility of fast-track reform.